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The Mathematics of Social Marketing

Jason FallsFounder, InstigatorSocial Media Explorer

We’re more than a decade into the movement known as social media, but businesses continue to struggle with this new construct of communication. The numbers show that most businesses are not fully leveraging, or even understanding, the world of social media marketing and social business.

A 2012 Zeno Group report found that 45% of small business CEOs do not consider social media when thinking about their company’s reputation. Question after question is asked at conferences, in blog comments, and even on Twitter by businesspeople from around the world: How can I drive business with social? How can I measure social media’s impact? How can I convert social networking contacts to customers?

The easy answer is that it’s not that easy. But it’s not impossible. Social media marketing is a thriving source of web traffic and revenue for many companies. But how have these companies turned social into commerce?

I propose here that the businesses that are taking the fun-and-games space of social media and turning it into revenue are those that study the Mathematics of Social Marketing. While your brand’s personality and interactions with fans are more qualitative, there’s an entire universe of quantitative data that can turn social strategy into something that looks a whole lot like search engine strategy. This movement from marketing to math can help the struggling social marketer move into a set of habits and actions that drive top- and bottom-line revenue, thus changing the outcomes of his or her social programs.

While industries, verticals, and categories of companies vary, understanding the Mathematics of Social Marketing can propel your social efforts from experimental and frustrating to calculated and profitable in a

matter of days or weeks.

Ready to do some math?

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Success in most digital marketing channels can be demonstrated by

mathematics. Ask good ecommerce or search marketing professionals how they

build successful programs, and they’ll point to conversion rates. Conversion

rates are the percentage of a total audience that takes an action.

To keep the nomenclature clear, I like to reserve the term “conversion rate” for

a monetary transaction. For other activities you’re trying to motivate (filling out

of forms, social shares, answering questions, and so on), I like to use the term

“action rate.”

For instance, if you have 1,000 visitors to a web page and 200 of them fill out a

form, and 20 of them actually purchase the product in question, you have a 20%

action rate (200 of the 1,000 filled out the form and took the action) and a 2%

conversion rate (20 of the 1,000 actually “converted” to become a customer.)

Search engine optimization and ecommerce experts live in this math. They know

how many visitors to a given site or page it takes to produce one action. They

also know how many of those actions they need to produce one conversion. They

focus their energies on two areas:

• Drive the requisite numbers to the page to result in the projected conversions

for their business’s success

• Optimize the site or page so it takes fewer visitors and/or actions to achieve

the same outcome

The more efficient the action and conversion rates on the back side of the

site or page, the less work there is on the front side to get people there. So, in

essence, this math is a microcosm of an effective business: Reduce costs and

maximize revenue.

Calculating Conversion Rates

20%

WEBSITE VISITS1000

200 LEADS

20 PURCHASES

ACTIONRATE

2% CONVERSIONRATE



In general, two kinds of people are in digital marketing:

communicators and technologists. Some individuals are talented enough to have

a bit of both, but these two roles are generally distinctive when assembling a

digital marketing team.

The communicators are good at strategic and creative thinking, bring a human

perspective to the table and, most of the time, are the extroverts and social types.

The technologists are good at analysis and problem-solving, offer a data and

mathematics perspective, and are often the introverts of the bunch.

Of course, these generalizations are not always accurate, but they do help

provide insights into the places our marketing efforts sometimes fall short.

Filling the top end of your digital marketing funnel has always been the task for

the communications folks. Many think just launching something on the internet

means people will see or find it. They have an “if you build it, they will come”

approach to launching initiatives.

The technologists are experienced enough to know this isn’t how the internet

works. If you build it, then promote the hell out of it, even manufacture traffic to

seed it, then people might come. The technologists make sure the backend of

the site is functional and helps increase traffic, often by a pay-per-click (PPC)

advertising budget. Capitalizing on the closely relevant keyword searches of

millions of internet users each day is one way that technologists find an initial

audience for the communicators’ efforts.

Think about the digital marketing initiatives you’ve been a part of in the past

that failed. Now think about why they failed. There’s a good chance they failed

because the idea wasn’t initially seeded or promoted well enough to provide

an initial lift. Sure, there could be other reasons, but “launch and hope” is an

unfortunate habit of many content producers.

Conversely, think about the initiatives that have been successful. There’s a good

chance they were such because advertising was used to seed the idea with an

audience that could then push it to their friends and networks.

Virality is seldom organic. It is typically manufactured.

This is frustrating to small businesses and communicators because they either

don’t budget for the manufacturing of traffic, or have some spirited belief the

program is so good, you shouldn’t have to pay for people to see it.

Spirited beliefs are almost always misguided.

Until the concept of content marketing began to be applied to the digital realm,

this is how the internet world operated. You needed X number of site visitors (let’s

say 100,000) to drive Y number of actions that produced leads (let’s say 10,000)

that could produce Z number of purchases (let’s say 1,000). With an average

order value in the hundreds or thousands (for B2B companies), digital marketing

could be supremely lucrative. For retail and consumer-facing businesses,

average order values of $10 and up produced at least a viable revenue stream

(even with these benchmark numbers).

And then social media arrived.

Analyzing The Front Side

Virality is seldom organic. It is typically manufactured.



When the front side of your business proposition was simple, you

spent what you needed to go get traffic. Perhaps you went all-in on paid search

and hoped for some organic search lift as icing on the cake. Maybe you mixed

paid and organic to get your traffic. Or you may have added in other directional

methods like direct mail or email marketing.

The promise of social media (albeit mistaken to a degree) in the mid-2000s

was that businesses could just join these social networks and suddenly see an

influx of not just new customers, but more qualified ones. The myth was that

participation—joining the conversation—was the only prerequisite for success,

and this new socially connected consumer would convert better. They were your

friends!

But marketers didn’t think it through. Social customers were interacting with brands

on human terms, not conversion terms. Think about it: a PPC advertisement is

presented to a human being who has just typed in a particular keyword or phrase

into a search engine. They know exactly what they are looking for. They are

searching. Provided your PPC ad messaging delivers on the promise of giving

the searcher what they’re seeking, you have your traffic. If the subsequent landing

page delivers on that promise, you have your action or conversion.

Now consider how the customer interacts on social channels. They aren’t there

seeking anything in particular. They’re having conversations. They may be

asking questions. They may be telling stories. They may be just watching others

do the same.

Better yet, they’re likely there to talk to other people – their family, friends, or

people with similar interests. The concept of talking to brands and companies is

alien in this context. You talk to a brand if and when you want to buy something,

not when you don’t. If a brand enters the field of vision and drops the “Click here

for a coupon!” message, it’s a message delivered in a context that is not ideally

relevant to the customer.

So if a company’s engagement efforts are such that these social conversations

attract customers to click through or find interest in an action or conversion point,

they are going to convert very differently than the searcher who knows what he

or she wants and is seeking it.

Simply put, your conversion rate for social traffic will be different than that of other

channels. It will likely be lower. This doesn’t make it bad. It only makes it different.

Meeting The Social Customer

Now consider how the customer interacts on social channels. They aren’t there seeking anything in particular. They’re having conversations.



The premise of social marketing is much like loyalty and reward programs

of old. Your focus is on customer retention, with customer acquisition as a

convenient side benefit. Sure, you can acquire customers by saying, “We have

a loyalty program where you can earn rewards, discounts, and the like.” But it’s

far more effective to position those types of programs to existing customers. “We

want to treat you really well to thank you for being a customer. Here’s a reward

program just for you.”

Loyalty programs are measured on repeat purchase and lifetime value of the

customer, not average order value and percentage of new customers purchasing.

Why, then, would social media, an avenue used for nurturing friendships with

customers, be primarily leveraged to acquire customers?

Treating social customers as loyal and/or repeat purchasers puts a new spin on

your conversion math. For example, let’s say my acquisition strategies lead to a

2% conversion rate and the customer spends an average of $25 with my brand

over his or her lifetime. But my customer retention strategy via social media leads

to a 0.75% conversion rate, and the customer spends $25 per quarter (and does

so for six years).

Lower conversion rate means a higher value.

Of course, social media as a marketing outlet is still in its infancy. Even socially

mature businesses find it difficult to prove this theory.

There’s also the complication of multiple consumer touch points. Your social

customers may also be your search customers, or those separate channels may

mix to lead certain customers to a conversion point. How you attribute which gets

what credit is difficult.

Last-touch attribution, until recently, was the only metric website analytics

software provided. Now metrics platforms have the ability to track a certain

customer (based on IP address and browser cookies) through sometimes weeks

of internet activity and intersection with your brand so they can appropriately

report how often and where that customer met your messages before they took

action or converted.

How Different Can Be Better

“We want to treat you really well to thank you for being a customer. Here’s a reward program just for you.”



Only now that we understand the differences in conversion rates between

the social customer and the traditionally acquired one, can we adequately plan

and enact social media programming and measure its effectiveness well.

Above all, it’s a numbers game. Like the 1,000 visitors to get 200 actions and 20

conversions scenario, your social marketing activity is all about understanding

your numbers.

Let’s say you have 1,000 Facebook fans. You engage them in conversation,

handle light customer service issues there, and get a modest level of

response. It’s time to learn your social conversion rate, so you post a message

with an offer: “Click here to claim a $10 coupon for your next order.”

(Note that Facebook terms may prevent you from conducting certain promotions

without using a third-party application. Contests and sweepstakes fall under

this umbrella. Organically driving your audience off-site to claim an offer or

coupon, however, is not currently prohibited by the site’s terms of service.)

We know that an average of 16% of your fans see your offer. (This is a metric

reported by Facebook in February of 2012 to illustrate how its Edgerank and the

number of connections the average user has impacts the visibility of your brand’s

posts.) Out of those 160 people, let’s say 10 click through.

Notice that the passive connection who isn’t searching for something specific

just became an active prospect. They knew they were clicking on an offer for a

specific discount. They want it, so they click! Now let’s assume 10 also claim the

offer, though in some instances there will be an attrition rate.

So your view rate is 16% (a number that is a sad fact of life on Facebook and one

you can only nominally affect organically) and your action rate is 1% (10 out of

1,000 fans clicked through), but your conversion rate is also 1% (assuming all 10

claim the offer or turn in the coupon with a purchase).

You could also calculate your action rate at 6.25% (10 out of 160 who saw it)

and conversion rate at the same clip. Unfortunately, Facebook’s Edgerank forces

marketers to treat the math here differently.

Using this math – the organic approach – in order to drive $10,000 from your

Facebook offer, your average order value needs to be $1,000 or you need to

participate in activities to drive your fan count to 100,000. The only other option

is to get your offer in front of more than 16% of your fans. Facebook advertising

can help with that.

Playing The Numbers Game

FANS ACTUALLY SEE FACEBOOK OFFER

160

VIEW RATE(160 / 1000 FANS )

16%

FANS CLICK 10

ACTION RATE(10 / 1000 FANS )

1%



Here’s where Facebook advertising and sponsored stories

become valuable to a brand. Let’s set your average order value at $25. You know

based on your organic conversion rate of 1% that you need 4,000 people to see

your message to convert and earn $1,000. For higher average order values (or

higher price-point products), you’ll need to be in front of fewer to make each

$1,000 of revenue.

You only have 1,000 fans, so you need to either grow fans or pay to get your

message in front of Facebook users that aren’t fans. So you click the “Promote”

drop-down on a Facebook post and place a sponsored post ad on Facebook.

This option allows your organic “post” (not advertisement) to now appear in the

news feeds of not just more of your fans, but their friends as well. This is where

you can target the 4,000 users you’ll need to drive $1,000 in revenue. But you

have to keep in mind that sponsored stories still carry with them the stigma of

being an ad. They will likely convert at a lesser rate than the opted-in fans who

saw your post.

Certainly, you can also take out standard Facebook advertisements (in other

words, a sidebar ad instead of a sponsored story) and target a far greater number

of people. Doing so simply means you’re mixing social conversion rates with

traditional advertising buy conversion rates. The math gets more complex, as

does the attribution.

For other social networks, the math isn’t as complex, either with or without

advertising added on. But the opportunity to get the message in front of

more people is limiting on these other social networks as well. While Twitter

has sponsored tweets, YouTube has pre-roll ads, and other networks make

promotional opportunities available, few are disguised as organic content the

way Facebook’s opportunities are. Thus, those opportunities (paid, not organic)

can be grouped and measured as advertising acquisition and conversion, as

opposed to social conversion.

Adding in the Value of Facebook Advertising

AVERAGE ORDER VALUE

$25 1%ORGANIC CONVERSION RATE

4000 VIEWS NEEDEDTO EARN

SOLUTION:GROW FANS OR CONSIDER

PAID ADVERTISING

$1000

/



The math of social marketing is really more focused on the

front side – getting people to the page or site in the first place. But the back

side is critically important, too. By the “back side,” I mean on-page or on-site

optimization. You can get millions of people to see it, but if you’re only getting

a 1-2% action rate, and thus a much smaller conversion rate, then you have an

incredible opportunity ahead.

With a little bit of testing, ideation, user-experience design, or even change of

copy, you can make incremental changes to a landing page and drive two, three,

maybe even five times the conversions. This makes the traffic you’re already

getting more valuable. Start with these techniques to vet your site’s optimization

and functionality:

• Be sure your CTA is obvious, whether that’s a large “checkout” button or a

succinct “subscribe” form.

• Don’t leave customers guessing what they should do once they hit your

landing page; they’ll bounce.

• Keep it clean—avoid overloading your landing page with too much copy or

too many distracting images. All of the focus should be on your CTA.

• Mobile-optimize your web pages, including the landing page, so that all

customers are enjoying the same user-friendly experience.

• Test different landing pages to see what converts best.

• Never stop aiming for improvement. Keep optimizing, even when your ads

and landing pages seem to be converting well.

It’s not just about what’s getting customers to the top of the sales funnel. Take

the time to check out analytics and traffic data to see how users are behaving on

your online properties. Use that data to update or tweak the back-end coding to

get your conversion rates as high as possible.

Tweaking The Back Side

With a little bit of testing, ideation, user-experience design, or even change of copy, you can make incremental changes to a landing page and drive two, three, maybe even five times the conversions. This makes the traffic you’re already getting more valuable.



So you want to drive $10,000 per month in revenue from Facebook?

Work backwards and do the math to discover how many eyeballs you’ll need,

based on the testing and establishment of your own action and conversion. If you

have enough organically grown fans to convert at an average order value and

accomplish $10,000 in revenue, congratulations – you don’t have to manufacture

traffic.

However, you’ll likely have to implement the same types of digital marketing

tactics your technologists have been implementing for years, just now on a social

network. Your math will show you can drive a certain portion of that $10,000

organically, but you need to put the message in front of more eyeballs to meet

your number.

Like good ecommerce and SEO practitioners have done for years, you’ll need to

factor in an ad spend to each of your revenue-driving Facebook posts to seed

the audience and achieve the $10,000 goal based on your conversion rates and

your average order value.

If this is your first time running Facebook ads, you’ll be happy to know that a

sponsored story campaign is one of the easiest ad set-ups that the internet

can muster. Sponsored stories simply let you capitalize on a good thing: the

conversion-generating Facebook posts you’re already creating.

And if this is your first time doing math since college, don’t stress about that,

either. It’s a matter of simple multiplication and division to get to a calculation that

works for your brand and supports your social efforts. And once you start yielding

impressive conversion numbers that prove social media’s ROI, you might end up

deciding that math is your new favorite subject.

Your ecommerce and search engine optimization team can help by focusing

on social placements as well as search placements. Your communicator-driven

social efforts and your technologist-driven search efforts will complement and

benefit one another.

Chalk it up to mathematics.

The Math Comes Full Circle

However, you’ll likely have to implement the same types of digital marketing tactics your technologists have been implementing for years, just now on a social network.

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